Country Road puts on a fashionable black

Picture: PETER MORRISCountry Road will open 15 outlets over the next two years.

Fashion retailer Country Road will focus on reining in costs and improving margins after admitting yesterday that industry competition would hinder any improvement in sales in the first half of 2003-04.

The company yesterday announced a $2.38 million net profit for 2002-03, overcoming flat sales with the help of a 2.3 per cent increase in margins.

The profit was a turnaround from the previous year's loss of $26.53 million, which included costs of $25.1 million associated with the company's exit from its 20 US stores.

Chief executive Ian Moir said the company would seek to maintain profitability in the absence of increased sales by instituting numerous logistical improvements.

"We're going to transition our business towards the retail model," he said. "The move away from the wholesale model will allow us to reduce our lead times . . . from 12 months to seven months. We will improve our supply chain, and all of the investment we've put into our new merchandising systems over the past two years will allow us to efficiently replenish stock."

Mr Moir said the company's decision to terminate its wholesaling agreement with David Jones would help in minimising discounting.

"Our brand was particularly impacted in the second half (of 2002-03)," he said. "With us exiting our relationship with David Jones and concentrating on our strategic relationship with Myer, it will allow us to better control our brand and concentrate on full-price merchandise."

Under the move to a "retail model", Country Road will open 15 outlets in the next two years.

Mr Moir also committed the company to retiring another $5 million in debt over the coming year, in addition to the $5 million paid off during 2002-03.

Directors did not declare a dividend. Country Road shares were steady yesterday at $1.30.